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Prob 12

A company granted stock options to employees that caused $50,000 in compensation expense per year over 5 years. The stock price never exceeded the option price during the 2 year exercise period, so no options were exercised. The contributed capital from recording compensation expense is left intact.

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31 views1 page

Prob 12

A company granted stock options to employees that caused $50,000 in compensation expense per year over 5 years. The stock price never exceeded the option price during the 2 year exercise period, so no options were exercised. The contributed capital from recording compensation expense is left intact.

Uploaded by

Deviline Michelle
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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A stock option plan with a positive fair value at grant date caused compensation expense of P50,000 per

year to be recorded over the five-year service period. During the exercise period (two years), the stock
price never exceeded the option price. Therefore, none of the options was exercised.

Choose the correct statement about the accounting for these options.

a. The contributed capital increase from recording compensation expense is reversed, causing
compensation expense to be reduced in the eighth year after grant.

b. The contributed capital increase from recording compensation expense is left intact.

c. The financial statements during the service period are retroactively restated by removing the
compensation expense.

d. The compensation expense for later option grants is reduced by the amount recognized on the
options that expired.

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